Amid a mounting wave of challenges, Ken Hu, the rotating chairman of Shenzhen-based telecoms and consumer electronics firm Huawei exhibited optimism Tuesday in the company’s ability to adapt to shifting circumstances. “We have to keep the ball rolling through nonstop innovation,” said Hu.
Speaking at a Q&A session held for the Huawei Global Analyst Summit 2022, the top executive acknowledged the complicated environment faced by the firm this year, brought about by geopolitical instability, the persistent pandemic, inflation, rising commodity prices and fluctuating exchange rates.
“Given the changes we expect in the business environment, we will face even more challenges this year,” he added.
The past several years have been a roller coaster ride for Huawei, after it was hit with US sanctions in 2019 for allegedly violating trade restrictions with Iran, among other security concerns. Cut off from the advanced computer chips needed for its once leading international smartphone business, the firm has been reckoning with an uncertain future as it works to formulate an alternative development strategy.
These setbacks have led Huawei to implement significant changes. Last week, the company announced it would be rebranding its key Consumer Business Group as its Terminal Business Group – part of a newfound focus on enterprise and governmental customers. It has unveiled a range of new product types for office settings, such as laptops, displays and printers that will mainly be targeted at industries including education, medical care, manufacturing, transportation, finance and energy.
“We have experienced a sharp decline in smartphone sales,” admitted Hu at the Tuesday event, “but this has got us thinking about the device business from a new perspective.”
Having achieved revenue of 636.8 billion yuan ($97.1 billion) in 2021, the fact that Huawei remains a privately held company offers it extra agility to turn on a dime, charting new paths into various sectors. While last year’s revenue figure represented an annual decrease of 28.6%, net profits of 113.7 billion yuan were up almost 76% year-on-year.
As the company works to solidify its transforming operations, its R&D expenditure has ballooned significantly. In 2021, Huawei spent 142.7 billion yuan on R&D, accounting for a whopping 22.4% expense ratio. According to Bloomberg, this rate is the highest among all major non-American companies – almost twice that of Amazon and Alphabet and more than three times that of Apple.
One of the areas Huawei is exploring is the metaverse, a broad term generally referring to the future immersive iteration of the internet, underpinned by AI, the internet of things, AR/VR, and smart wearable devices.
David Wang, Huawei’s Executive Director of the Board and Chairman of the ICT Infrastructure Managing Board, commented on the firm’s metaverse objectives at Tuesday’s event, saying: “At Huawei, we will contribute to the development of the metaverse by focusing on our core businesses such as ICT infrastructure, cloud, and smart devices.”
If the metaverse is to be realized, “real-time interactions will impose much higher demands on latency and uplink and downlink bandwidths,” said Wang, adding that Huawei’s 5G and computing architecture strengths would be leveraged to make such functions a reality. In terms of devices, Wang emphasized the potential role to be played in the metaverse by Huawei smartphones, glasses, and wearables.
Positioning itself as a key solutions provider for the corporate sector, Huawei is also aiming to expand its IT offerings to a wider range of customers. Its cloud services division – Huawei Cloud – recorded 20.1 billion yuan in revenue last year, up 30% year-on-year. Meanwhile, the total global number of devices equipped with its self-developed operating system, HarmonyOS, topped 220 million at the end of last year, according to the company’s annual report.
Another exciting and novel future venture for Huawei is autonomous vehicle technology. The firm has recently embarked on various industry partnerships in this field, including with California-based Seres, a subsidiary of Chinese firm Sokon Group. As rotating chairman Ken Hu said on Tuesday, “CASE vehicles, commonly known as connected, autonomous, shared, and electric vehicles, have become an increasingly prominent area for future development.”
In the near term, Huawei is casting its net wide in an attempt to determine where its future core industry strengths will ultimately lie. But with declining revenue and enduring challenges, it’s unclear how long this strategy can last.
“Solid operations are also a must if we are going to survive and do so sustainably,” said Hu at the Tuesday event. “If a company collapses, all of its visions and ideals are just empty talk. To survive, Huawei must first ensure solid operations.”